Solar may be alternative for dealing with California’s high energy costs

Dec 02, 2013

California’s energy and environmental policies make it a high-cost energy state. But some growers are finding that installing solar panel arrays can be an answer to the dilemma of rising electrical bills. HelioPower’s Tom Millhoff talked about some of the reasons why California’s costs are high and how farmers can use solar panels and tax credits to reduce their own costs. Millhoff was a speaker at this year’s American Society of Farm Manager and Rural Appraisers annual meeting in Reno, Nev.

There is little doubt farmers in California face rising, volatile retail energy prices, he says. Most remember that prices for electricity for large ag users jumped 14 percent in 2008. Prices increases have moderated somewhat and are expected to only increase about 4 percent in 2013. Forecasts show that Pacific Gas & Electric’s rates for large ag producers could range to between 30 and 60 cents per KwH over the next 20 years.

In the past, centralized power generation has been the norm for most of the U.S. New power plants, whether coal-fired, natural-gas or nuclear-powered, have involved massive capital costs and have been characterized by the need for economies of scale, lack of substitutes, rising fuel costs, lack of competition and price inelasticity brought on by monopoly power.

New, “distributed generation” facilities are beginning to make inroads because they offer modest capital costs, economies from being located in close proximity to the need, low-to-zero cost fuel, falling legal barriers, the promise of emission reductions and an increasingly competitive marketplace. All those features are helping the cause of solar energy in the dry climates of high-energy-cost states like California.

“I’m very bullish on solar in places where the sun shines and energy rates are very high,” says Millhoff. “In California, there’s a very good chance that if you’re in agribusiness you can save a lot of money with solar. And a lot of people who looked at solar two or three years ago and found that it didn’t pencil for them should probably think about reconsidering.

“Project prices have fallen about 20 percent in that time, and new policies such as meter aggregation are allowing, growers and food processors and food handlers to install solar in creative ways and reduce loads in ways they might not have been able to previously.”

Example: “If you’re a vineyard, and you have a remote irrigation pump in the middle of productive cropland or in the middle of an orchard, and you didn’t want to remove vines or trees to put in a solar facility, today you could put a solar facility on fallow land or on a roof at one location, and you can generate a bill credit or offset your energy load at a remote location without sacrificing those crops.”

A common approach in California is for a producer to become a net generator of energy and send electricity back on to the grid during the day when energy is expensive and buy them back at night, says Millhoff. “So you get to sell expensive energy and buy back cheap energy.”

A couple of HelioPower clients are now expanding their solar energy-generating capacity so they can take better advantage of the leverage they can get by offsetting peak demand load and buying energy back at night.

California’s electric costs are higher than many other states for a variety of reasons. One of those is that utilities cannot purchase electricity made with coal-fired generating plants. Another is that 33 percent of electric supplies must come from renewable sources.

While they don’t face the same costs as California rate payers, consumers in other states are also beginning to see benefits from renewable energy sources such as wind and water power, depending on the region. Millhoff says solar will also be of value to producers in the Southwest and other states outside California.